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FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-9900
ARIZONA LAND INCOME CORPORATION
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(Exact name of registrant as specified in its charter)
Arizona 86-0602478
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2999 N. 44th Street, Suite 100, Phoenix, Arizona 85018
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(Address of principal executive offices)
(Zip Code)
(602) 952-6800
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [N/A] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of November 7, 2000, there were 2,160,280 shares of Class A common stock
and 100 shares of Class B common stock issued and outstanding.
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<PAGE>
Table of Contents
Page
----
Part I
Item 1. Financial Statements ............................................. 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................ 7 & 8
Part II
Item 1. Legal Proceedings ................................................ 9
Item 2. Changes in Securities ............................................ 9
Item 3. Defaults upon Senior Securities .................................. 9
Item 4. Submission of Matters to a Vote of Security Holders .............. 9
Item 5. Other Information ................................................ 9
Item 6. Exhibits and Reports on Form 8-K8 ................................ 9
Signatures ............................................................... 9
2
<PAGE>
ARIZONA LAND INCOME CORPORATION
Balance Sheets
September 30, December 31,
2000 1999
------------ ------------
(Unaudited)
Assets
Cash and temporary investments $ 1,799,612 $ 1,907,438
------------ ------------
Investments -
Accrued interest receivable 169,779 282,406
Mortgages receivable 5,130,319 7,247,564
Investment in partnerships 333,538 325,538
Land held for sale 3,135,089 3,182,034
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8,768,725 11,037,542
Less - Reserve for losses (590,898) (618,769)
------------ ------------
Total investments, net 8,177,827 10,418,773
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Total assets $ 9,977,439 $ 12,326,211
============ ============
Liabilities
Accounts payable and other liabilities $ 17,552 $ 25,362
Accrued property taxes 9,113 7,671
Dividends payable 206,992 233,533
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Total liabilities 233,657 266,566
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Stockholders' Equity
Common stock-Class A 206,928 230,848
Common stock-Class B 10 10
Additional paid-in capital 22,574,141 23,551,348
Distributions in excess of income (13,037,297) (11,722,561)
------------ ------------
Total stockholders' equity 9,743,782 12,059,645
------------ ------------
Total liabilities and stockholders' equity $ 9,977,439 $ 12,326,211
============ ============
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
ARIZONA LAND INCOME CORPORATION
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income
Interest on mortgages $ 128,776 $ 164,908 $ 438,322 $ 497,825
Interest on temporary investments 8,570 19,521 57,698 113,179
Miscellaneous income 3,000 3,100 9,000 9,700
---------- ---------- ---------- ----------
Total income before gain on sale of properties 140,346 187,529 505,020 620,704
---------- ---------- ---------- ----------
Expenses
Professional services 3,673 8,822 32,792 42,824
Advisory fee 7,572 9,928 23,322 29,754
Administration and general 6,375 3,347 29,756 29,286
Directors' fees -- 5,800 16,778 17,000
Property taxes 2,500 6,396 7,500 12,796
---------- ---------- ---------- ----------
Total expenses 20,120 34,293 110,148 131,660
---------- ---------- ---------- ----------
Income before gain on sale of properties 120,227 153,236 394,873 489,044
Gain on sale of properties 3,177 254,750 7,795 267,319
---------- ---------- ---------- ----------
Net income before income taxes 123,404 407,986 402,668 756,363
---------- ---------- ---------- ----------
Net income $ 123,404 $ 407,986 $ 402,668 $ 756,363
========== ========== ========== ==========
Earnings per common share $ 0.06 $ 0.17 $ 0.19 $ 0.32
Dividends declared per share $ 0.10 $ 0.10 $ 0.80 $ 1.30
Weighted average number of shares of
common stock outstanding 2,130,606 2,351,784 2,161,453 2,357,284
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
ARIZONA LAND INCOME CORPORATION
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 402,668 $ 756,363
Adjustments to reconcile net income to net cash
provided by operating activities-
Gain on land sale (7,795) (267,319)
Change in accrued interest receivable 112,627 59,970
Change in accounts payable and other liabilities (6,368) 10,538
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Net cash provided by operating activities 501,132 559,552
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Cash Flows from Investing Activities:
Cash proceeds from land sales 15,628 516,287
Principal payments received under mortgages 2,128,486 789,709
Cash purchases of land & mortgage interest -- (789,216)
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Net cash provided by investing activities 2,144,114 516,780
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Cash Flows from Financing Activities:
Additional investment in partnership (8,000) --
Payment of dividends (1,743,945) (2,832,096)
Repurchase of shares of Class A common stock (1,001,127) (81,361)
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Net cash used in financing activities (2,753,072) (2,913,457)
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Increase in Cash and Temporary Investments (107,826) (1,837,125)
Cash and temporary investments - beginning of period 1,907,438 4,105,346
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Cash and temporary investments - end of period $ 1,799,612 $ 2,268,221
=========== ===========
Schedule of Non-Cash Investing and Financing Activities:
Seller financing in conjunction with land sale $ 11,241 $ 18,057
Dividends declared in excess of dividends paid 206,928 235,327
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Arizona Land Income Corporation
Notes to Financial Statements
September 30, 2000
Note 1 BASIS OF PRESENTATION - The financial statements have been prepared by
Arizona Land Income Corporation (the "Company") without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of the Company, the unaudited financial
statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial
position, the results of operations and cash flows for the periods
presented.
Note 2 The results of operations for the three and nine months ended
September 30, 2000, are not necessarily indicative of the results to
be expected for the full year.
Note 3 See Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations for a discussion of mortgages in
default. It is the Company's normal policy to discontinue the accrual
of interest for notes in default as of the default date.
Note 4 On September 6, 2000, the Company received payment in full on mortgage
receivable Loan No. 15 of approximately $457,500. In April and May
2000, the Company received payment in full on mortgage receivable Loan
No. 10 of approximately $1,055,000, and on mortgage receivable Loan
No. 5 of approximately $496,000 respectively.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Arizona Land Income Corporation (the "Company") is an Arizona corporation
which has elected to be treated as a real estate investment trust (a "REIT")
under the Internal Revenue Code of 1986. The statements of operations filed
herewith cover the periods from July 1, 2000 through September 30, 2000, and
January 1, 2000 through September 30, 2000
For the quarter ended September 30, 2000, the Company had total income
before sale of properties of approximately $140,000 compared to $188,000 for the
quarter ended September 30, 1999.
The Company's expenses for the quarter ended September 30, 2000 were
approximately $20,000 compared to $34,000 for the quarter ended September 30,
1999.
The Company reported net income of approximately $123,000 for the quarter
ended September 30, 2000 compared to $408,000 for the quarter ended September
30, 1999. This decrease was primarily attributable to gain on sale of properties
of $3,000, compared to $255,000 for the comparable prior period. Without regard
to property sale gains, the net income was approximately $120,000 compared to
$153,000.
The Company reported total income before sale of properties of
approximately $505,000 for the nine months ended September 30, 2000 compared to
$621,000 for the same period in the prior fiscal year. This decrease can be
attributed to a decrease in mortgage income of approximately $60,000, a decrease
in temporary investment interest of $55,000.
For the nine months ended September 30, 2000, the Company's expenses
totaled approximately $110,000 compared to $132,000 for the same period in the
prior fiscal year. The Company reported net income of approximately $403,000 for
the nine months ended September 30, 2000 compared to $756,000 in 1999. Without
regard to gain on the sale of properties, the net income was approximately
$395,000 compared to $489,000.
The Company reported a decrease in cash and temporary investments of
approximately $108,000 during the operating period of January 1, 2000 through
September 30, 2000. This decrease resulted primarily from the repurchase of
shares of Class A common stock of $1,001,000, and distribution of dividends of
$1,744,000. The Company also received payment in full on mortgage receivables of
approximately $2,008,000.
Adverse market conditions negatively affected real estate values in the
metropolitan Phoenix area during the early 1990's resulting in a decline in real
estate values and an increase in mortgage defaults. The Phoenix real estate
market has improved and land values have stabilized and improved in certain
instances. The Company believes that such improvements will reduce the number of
loan defaults or modifications; however, there can be no assurances in this
regard. Nonetheless, the Company will continue to vigorously assert any and all
its legal rights in the event of a default.
The Company completed one land sale during the period of July 1, 2000
through September 30, 2000. The sale was a 9.4 acre parcel of land which the
Company acquired through foreclosure on Loan No. 6. The Company received a note
receivable in the amount of approximately $8,600 and $1,500 in cash from this
sale. During the first half of 2000, the Company completed three small land
sales totaling approximately 16 acres of property located in Pinal County,
Arizona, which the Company acquired through foreclosure on Loan No. 6. The
Company received approximately $14,000 in cash and a $2,500 note receivable from
these sales.
In September 2000, the Company received a cash payoff of approximately
$457,500 on Loan No. 15. During the second quarter of 2000, the Company received
a cash payoff of approximately $1,055,000 on Loan No. 10, and approximately
$496,000 on Loan No. 5. These collections were in addition to periodic
collections of principal on other notes.
7
<PAGE>
ITEM 2. (CONT.)
On September 20, 2000 the Company announced that it had purchased in open
market transactions 91,000 shares of its Class A Common Stock in the past 45
days. It is the Company's intent to retire these shares. The purchases were made
pursuant to a continuing authorization granted by the Company's board of
directors. That authorization provides that the Company may from time to time
purchase shares of Arizona Land Income Corporation stock in transactions
effected in the open market or through privately negotiated transactions. The
board has authorized the repurchase of up to 500,000 shares at such times as
management may determine that a purchase under the program is in the best
interests of the Company and its shareholders.
On September 22, 2000, the Company declared a $.10 per share dividend with
a record date of October 2, 2000, and payable on October 16, 2000. The total
amount distributed to shareholders was approximately $216,000. During the third
quarter of 2000, the Company paid a dividend of $.60 per share with a record
date of June 30, 2000, and payable July 14, 2000. The total amount distributed
to shareholders was approximately $1,296,000. The Company also paid a dividend
of $.10 per share on April 14, 2000, distributed to shareholders of record on
April 4, 2000. The total amount distributed to shareholders was approximately
$217,000.
The Company believes that funds generated from operations will be
sufficient to meet its capital requirements. No other arrangements, such as
lines of credit, have been made to obtain external sources of capital. While no
assurance can be given, the Company believes that such arrangements could be
obtained by the Company, if necessary.
As disclosed in the Company's prospectus used in connection with the
Company's 1988 initial public offering, the Company intended to dissolve within
approximately eight years from the date of such public offering. The precise
date on which the Company will dissolve will be determined by the Company's
Board of Directors and will depend upon market conditions and other pertinent
factors. The Board of Directors also has the discretion to indefinitely continue
the operation of the Company. As of November 7, 2000, the Board has not made a
decision regarding the dissolution of the Company.
The mortgage loan numbers referred to in the above paragraphs are
identifiers for those loans on the books and records of the Company.
Additionally, these numbers are identified in the Company's initial offering
prospectus dated June 6, 1988.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Furnish the exhibits required by Item 601 of Regulation S-K.
Exhibit No. Description Method of Filing
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27 Financial Data Schedule Filed Herewith
(b) Reports of Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARIZONA LAND INCOME CORPORATION
November 7, 2000 /s/ Thomas R. Hislop
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Date Thomas R. Hislop
Vice President and Chief Financial Officer
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